The Debt Mirage

Updated Jan. 8, 2001 12:01 a.m. ET

The most recent figures on the budget surplus show that it has grown again. The largesse, said a chortling President Clinton, will run to almost $5 trillion over the next decade. His advice was to use it to pay off the $3.5 trillion national debt.

We've been hearing a lot of this particular piece of advice lately. But the notion that the best use of the surplus is to pay off the debt rests on some dubious thinking, which runs like this: Debt reduction reduces interest rates and thus encourages capital investment which...